Why buying groups provide us with plenty to ponder

Are buying groups able to reflect changes in the way the market does business? Do their payment conditions prevent more distributors from participating? There are many questions that the industry still has to conclusively answer when it comes to this topic, writes Bill Downie of Meiko.

"The arrival of ENSE — the European Network of Supplies & Equipment — into the UK catering equipment market raises a key issue for equipment distributors, kitchen and project houses. Why?

ENSE has been quoted as saying that it will offer “benefits from rebate, discounts, deals and things like that”. I personally wish ENSE the very best of luck, as there are probably dozens of distributors out there that do not benefit from the purchasing power of the larger kitchen houses.

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However, its arrival on the scene does highlight the fact that the UK catering equipment industry has so far been unable to construct a buying organisation model that encompasses all sectors of the UK market — a model that appears to work so successfully in the North American market.

There is, of course, Cedabond, a membership-based buying consortium that has operated in the UK catering equipment market since 1977 and boasts some 60 participating distributors and 40 equipment supplier members.

But does the Cedabond business model need to change to reflect the fiercely competitive market that has existed over the past few years, where value engineering and delayed contractor payments seem to be the order of the day?

And how can it reach out to attract a wider audience of distributors and kitchen contractors who would be keen to join the consortium, but are unable to work within the strict monthly payment terms required due to the type of business sector they work in. This, of course, is another topic entirely!

Or is there another way? Should the suppliers be more proactive in setting up distributor agreements that reward both commitment and performance across the wide and varied sectors of the industry? Why is it that a supplier is unable to allocate funds to offer a financial bonus scheme to an individual distributor, but can find funds for a buying group or consortium?

Increased volume will probably be the answer to that question, but what guarantee does the supplier have that the volume of business generated will increase?

The key question for all concerned is why does this disparity in supplier/distributor relationships exist at all? Why do suppliers allow this to happen? If suppliers have a real commitment to the industry, why do we not already have some form of agreement in place with these market players? ENSE has spotted a gap in the market and it remains to be seen if they are able to capitalise on the opportunity.

Cedabond is currently in the process of restructuring the management and direction of the consortium and, as suppliers, we eagerly await the outcome.

One thing is for sure — 2013 will be a challenging time, not just for the industry, but for the concept of buying groups and consortiums.

As Catering Insight’s editor Andrew Seymour recently wrote, the success of any buying group still boils down to facilitating the kind of benefits and results that members simply couldn’t achieve on their own’. Or could they?

Here at Meiko, we are hosting a dealer seminar in Offenburg at the end of November for upwards of 55 distributors, where the 2013 Key Partner Distributor agreement draft will be introduced for discussion. No doubt we will touch on the subject of buying groups — and we would welcome your questions and thoughts on this very topical issue."

Bill Downie is Managing Director of warewashing manufacturer Meiko UK. www.meiko-uk.co.uk

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